The Court of Appeals for the Third Circuit has overturned a summary judgment ruling in favor of a defendant that was sued for violating the Fair Credit Reporting Act because it reported an overdue balance to the credit reporting agencies after receiving notice that the balance was being disputed by the plaintiffs.
The background: This case stems from a dispute between the plaintiffs and one of the defendants regarding a vehicle lease. The plaintiffs returned the vehicle to a dealership but failed to follow the required procedure for doing so. As a result, the dealership refused to accept the car, so the plaintiffs just left it there at the dealership.
- The defendant continued to charge the plaintiffs for additional payments, labeling them as overdue charges because the vehicle was not processed properly. The plaintiffs disputed these charges, claiming they had returned the vehicle. Despite the objections, the defendant continued to report the balance as overdue to the credit reporting agencies.
- Following several disputes and complaints filed with the Consumer Financial Protection Bureau, the defendant did remove the delinquency from the plaintiffs’ account.
- The plaintiffs then initiated this lawsuit, alleging the defendant violated the FCRA by reporting inaccurate information to credit agencies after being notified of the dispute.
The ruling: A District Court judge ruled in favor of the defendant, stating that the plaintiffs’ dispute was more about a contractual issue than a factual inaccuracy. The court held that the FCRA does not address legal disputes over the validity of a debt, dismissing the plaintiffs’ claim.
- The Third Circuit, though, saw it otherwise. The Appeals Court found that there was a genuine dispute of material fact regarding whether the information reported by the defendant was accurate or misleading.
- The court highlighted that the defendant’s complaints department had already concluded that the plaintiffs owed no additional payments, and it had recommended removing the delinquency from the plaintiffs’ credit report. However, the credit reporting team ignored this request, partly due to a typographical error on one of the forms.
- The Appeals Court determined that a jury could reasonably conclude that the defendant’s failure to correct the delinquency was not based on a bona fide belief that the plaintiffs owed the debt but was instead the result of administrative errors and poor communication between departments.
- The court emphasized that the issue should be reviewed in a trial rather than resolved at the summary judgment stage, as the evidence suggested that the defendant’s investigation may have been unreasonable.
